A recent case involving a Boston-area teen and his $18,000 cell phone bill highlights the need for smarter real-time billing systems to avoid "bill shock" as more third-party retailer apps flood the market.

Wireless carriers lament that they don't want their networks to be dumb pipes anymore. But a recent case involving a Boston-area teen and his $18,000 bill from Verizon Wireless -- racked up by tethering his cell phone to his laptop -- may foreshadow what awaits carriers if they lack intelligent real-time billing systems.

If we don't tie fulfillment, billing and service management more tightly together ... we may compromise hundreds of billions of dollars of revenue opportunity and a tremendous amount of utility.

Tom Nolle President, CIMI Corp.

More billing embarrassments are inevitable as carriers continue to deliver third-party apps hawking goods and services.

"We need policy management for service decisions while the service is being invoked," said telecom consultant Tom Nolle, president of CIMI Corp. "Where we're heading would make it possible for Little Johnny to buy a car and bill it to his cell phone … [but] Little Johnny can't be allowed to buy a car and get a do-over. We can solve the problems of today just by forgiving the debt. We can't do that for the problems of tomorrow."

When wireless carriers had to support only voice calls and text messages, their existing operations support systems (OSS) and billing support systems (BSS) had been sufficient, Nolle said. Those systems automatically capture and catalogue account activity after it occurs but only spit out reports as needed for monthly statements or customer Web portals that don't promise real-time usage stats.

"If we don't tie fulfillment, billing and service management more tightly together, what could happen is we have a choice of forcing unreasonable bills on unwilling consumers or shutting down services," he said. "We may compromise hundreds of billions of dollars of revenue opportunity and a tremendous amount of utility to customers."

Wireless 'ecosystem' may depend on real-time billing overhaul

The rise of app stores is changing the market dynamics -- wedging wireless carriers in among consumers, retailers and application developers -- and driving the need for more real-time billing systems, Nolle said.

More next-generation OSS/BSS systems resources

"The trouble with the new services developing is that the stuff you have to pay for can get buried in the experience," he said. This set-up creates a service-layer problem because the overall experience where the pay services are embedded doesn't typically carry a service charge.

If carriers can't untangle this dilemma, it could easily stifle mobile application development and upend the "ecosystem" of carriers, developers and retailers selling goods and services through these platforms, according to Sara Kaufman, mobile strategies analyst at Ovum.

"The complexity of the relationship … is actually hampering, to some extent, the development of more sophisticated third-party apps," Kaufman said. "Most of the third-party app vendors … I have talked to will go on and on about how difficult it is to navigate the operator's payment and billing systems."

Capping overages with real-time billing systems

It's not that operators don't have the technology to integrate real-time billing systems with network policy. All four major U.S. carriers offer overage protection services to family plan customers, most selling it for $2 to $5 per month; Sprint Nextel Corp. is the only one of the four to offer it free of charge.

The services enable parents to create custom restrictions for their children on calls, texts, data usage, content purchases and handset features. The controls shut down service under a variety of policies -- based on usage, time and/or phone numbers -- while allowing usage to reopen for emergency calls or an approved list of contacts.

More intelligent OSS and real-time billing systems can apply policy and enable the network to make that possible, according to Joanne Steinberg, marketing director at Bridgewater Systems, a vendor of "mobile personalization" software.

Bridgewater's myPolicy platform -- launched last year and in use by one undisclosed European carrier -- is a smartphone application that works with a policy controller in the carrier's core network to make decisions based on real-time billing information, Steinberg said. Users track and set dollar or megabyte limits from their handset, deciding when to alert or cut themselves off.

'Bill shock' publicity could lead to U.S. FCC action

Last year, the European Union passed a "bill shock" law that caps roaming voice and data charges by European carriers, but U.S. carriers are under no obligation -- yet -- to be proactive about cutting off service when customers go over their plan limits.

What about FCC-mandated real-time billing and policy?

Although official FCC letters often send shivers down operators' spines, telecom consultant Tom Nolle said regulation requiring carriers to automatically alert and/or cut off users about to incur overage charges may work in carriers' favor.

"Whenever you try to take a step to remedy a problem, the worst thing you can do is take a step that implies that now you have a responsibility but not a remedy to the problem. Before, they had the perfect dodge: 'You signed a contract,'" said Nolle, president of CIMI Corp. "As soon as [carriers] start to come along and say, 'We're going to forgive egregious bills,' [they] lack any objective standards of what's egregious."

Federal regulation would give carriers standards to follow for "pre-bill intervention," he said. "A lot of people, myself included, feel that something like this should have been done here a long time ago."

Ideally, Nolle said, the regulation would require that any communications device that facilitates services must have mechanisms for "active opt-in for any incremental charge that's levied by a third-party player as a consequence of a request."

The real-time billing services offered by U.S. carriers are notably optional services for a reason, said Deepa Karthikeyan, senior analyst at Current Analysis. "In my opinion, carriers are not automatically sending out alerts, because they would lose a chunk of revenue from overage charges," she said. "While dramatic bills like the $18,000 Verizon Wireless one usually go away," Karthikeyan said, "I suspect that users are required to fork up smaller overage charges."

Now that carriers have gotten a taste of revenue from selling overage protection plans, they may be unlikely to offer it widely as a standard automated service, according to Kaufman.

"I don't hear the carriers talking about that being a big priority for them," she said. "All of the family usage tools are probably of more interest to the operators because they can charge people for it … [and] 70% of carrier subscribers are part of family services."

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